UI Modernization Attachment E

Attachment V
Suspensions
Interest on Advances and Federal Taxation of UC
INTEREST PAYMENTS
V-1. Question: How did the amendments made by Section 2004 of Public Law 111-5 affect
interest due on Title XII advances?
Answer: Section 2004 added new paragraph (10) to Section 1202(b), SSA. Under this new
paragraph, any interest payment due during the period beginning on the date of enactment (that is
beginning February 17, 2009) and ending on December 31, 2010, shall be “deemed to have been”
paid by the state. This effectively waives all interest due during this period. Further, no interest
accrues on any advance or advances made to a state during this period.
V-2. Question: Will interest accrue on advances made prior to the date of enactment?
Answer: Yes. Although interest will accrue on such advances, any interest due within the
period beginning February 17, 2009, and ending on December 31, 2010 will, as discussed in the
previous Q&A, be waived. However, interest accrued after September 30, 2010, will not be due
within this period. Instead, such accrued interest will be due no later than September 30, 2011.
V-3. Question: How is interest after December 31, 2010, determined?
Answer: The normal rules for determining the amounts of interest accrued and the dates interest
is due will again apply.
PARTIAL SUSPENSION OF FEDERAL INCOME TAX
V-4. Question: How did the amendments made by Public Law 111-5 affect the taxation of
unemployment benefits?
Answer: For tax year 2009 only, the first $2,400 paid in unemployment benefits is not subject to
Federal income tax. Amounts above $2,400 remain taxable.
V-5. Question: Will this suspension require any operational changes by my agency?
Answer: States are to continue to (1) report UC payments on Form 1099 and (2) withhold
Federal income tax from UC benefits when requested by the individual. States are encouraged to
promptly update information provided to individuals about the taxation of UC so that individuals
may make informed decisions about whether to elect (or continue) the withholding of Federal
income tax from UC.